Banking News

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Current account customers join savers as rate cut means lower returns

11 November 2008 / by Rachael Stiles

Savers are not the only group missing out from the 1.5 per cent cut in the base rate last week, as current account providers also cut rates on in-credit balances after the announcement, according to uSwitch.com.

The current account customers of six banks and building societies have had the interest they earn on their balances when they are in credit cut by as much as 0.99 per cent, the comparison and switching website found, they reacted to the Bank of England cutting the base rate to three per cent.

The current account providers which have cut their rates include Lloyds TSB, which has cut rates on its Premier Plus, Platinum Plus, Gold Plus and Classic Plus accounts by 0.48 per cent; Intelligent Finance has cut 0.99 per cent off its range; Nationwide has cut rates on its Flex Accounts by up to 0.50 per cent; Halifax has cut its Asset Reserve Cheque Account rate by 0.40 per cent; Coventry Building Society has reduced the returns on its Callsave Moneymanager, Branchsave Moneymanager and First accounts by 0.50 per cent, and Norwich and Peterborough Building Society has cut its Gold Current Accounts by up to 0.50 per cent.

"This revenue-boosting move by six providers to reduce in-credit current account interest rates conveniently came in a week when headlines were focused on mortgage and savings rates." said Louise Bond, personal finance manager at uSwitch.com.

"Those cynics among us could be forgiven for thinking that, whilst attention was diverted towards the base rate decision, providers were hoping that these rate reductions would slip unnoticed under the radar."

Ms Bond highlights the discrepancy between hastily made cuts on savings accounts and current accounts and the number of lenders which have not heeded calls to cut rates in order to help struggling mortgage borrowers.

"Consumers have faced rocketing loan rates, increases to mortgage tracker rates, and minimal SVR reductions in response to the base rate cuts." she said, adding that "The jury is also still very much out as to how much of last week's drastic 1.5% cut will be passed on to borrowers as banks await the impact on the Libor rate which still sits at 4.49%."

"Historically, credit current account interest rates have been rather pitiful, and many of the big banks still offer as little as 0.1%. Unfortunately, with increasing consolidation in the banking sector, potentially resulting in a reduction in the number of competitive products available, consumers must act now to seek out the best deals."

According to uSwitch.com, the best current accounts are now available from Alliance & Leicester, which is offering 8.50 per cent interest on its Premier Direct Current Account, Abbey is offering 8.00 per cent, the HSBC Bank Accout Plus has a rate of 6.00 per cent, while Halifax has two of the top rates with its High Interest current account and its Ultimate Reward current account, both offering 5.12 per cent.